US Plans to End Preferential Trade Program for India and Turkey

US Plans to End Preferential Trade Program for India and Turkey

In the latest push by the Trump administration to equalize what it considers to be unfair international trade relationships, the administration moved to end trade benefits to India and Turkey. On Monday, March 4, 2019, U.S. Trade Representative (“USTR”) Robert Lighthizer announced that India and Turkey would no longer qualify under the Generalized System of Preferences (“GSP”) program. This announcement comes under the direction of President Trump, who indicated India’s removal is due to failure to provide assurances that it will grant equitable and reasonable access to its markets in numerous sectors. Turkey’s termination follows a USTR review finding the country is adequately economically developed and requires no preferential market access to the U.S.

The U.S. Congress, as well as India and Turkey, were notified of the action, which starts the 60-day countdown before the countries can be removed from the agreement. The earliest date for the removal of the countries from the GSP program is May 3, 2019.

Under the GSP program, “certain products can enter the US duty-free if the beneficiary developing country meets a set of criteria established by Congress”. The Trump administration argues that countries who are no longer considered “developing” shouldn’t receive special benefits from the U.S. to help with economic growth. Currently, the U.S. imports from India roughly $5.6 billion worth of duty-free goods under the GSP program.

India does not intend to dispute the USTR decision to end trade benefits. India’s economy is rapidly growing, and it could potentially become the world’s fifth largest economy as soon as this year. Monideepa M. Mukherjee, a spokeswoman for India’s commerce ministry recently commented, “The GSP benefits will go, the U.S. will not relent on this. It’s meant for least-developed countries, and India has graduated out of that.” India intends to continue strong trade relations with the U.S., and anticipates that this change will have “minimal economic impact”.

The Turkish Trade Minister Ruhsar Pekcan tweeted that the decision conflicted with the mutual goal of increasing trade between the U.S. and Turkey. Pekcan said that the move to end trade benefits with Turkey would negatively impact small and medium-sized businesses in the U.S.“We still would like to pursue our target of increasing Turkey’s bilateral trade with the U.S. that we see as our strategic partner, without losing any momentum,” she added.

Turkey accounts for $1.7 billion of duty-free imports to the US, currently the 5th largest supplier, roughly 1 percent of Turkey’s total exports. “Increases in Gross National Income per capita, declining poverty rates, and export diversification by trading partner and by sector are all evidence of Turkey’s increased level of economic development,” the USTR said.

Clients who source imports from India or Turkey and will be facing import duties after the loss of GSP status, should contact Charter’s duty drawback team in order to determine your eligibility for obtaining refunds of these duties, taxes and fees.

If you have any questions on the GSP changes, please reach out to any member of Charter’s Compliance team at Compliance@charterbrokerage.net. If you have any questions regarding the potential for duty drawback, please reach out to our Drawback team at Drawback@charterbrokerage.net.